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MPs call on regulator to split BT

Oftel criticised for handling of broadband market

MPs have criticised Oftel's handling of the nascent broadband market and have called on the watchdog's forthcoming replacement, Ofcom, to split up BT to put matters right.

The House of Commons Culture, Media and Sport Select Committee has recommended that BT's network division be separated from the rest of the business, as lobbied for by Cable & Wireless chief executive Graham Wallace.

"We recommend that Oftel, and Ofcom when it takes over the responsibilities of Oftel in due course, should take serious note of criticisms of its effectiveness in establishing a competitive UK market for broadband," said the Committee's report, published this afternoon.

"[The regulator should] follow up with remedial action taking account of the proposal to require BT's network to stand on its own as a distinct business," it added.

Wallace had told the Committee that BT's market dominance should be investigated by the Monopolies and Mergers Commission.

"The maintenance of the status quo is not an option if we want a competitive market in the UK," he told MPs.

Wallace blamed sluggish growth in the ADSL broadband market on high prices caused by BT owning both a retail business and the local loop, the last mile of the telephone network connecting individual users to local exchanges.

"The solution is to separate the natural monopoly of the local loop from the rest of BT's activities. The current model encourages BT to minimise investment and maximise prices. That's what monopolists do," he told MPs last Autumn.

However, BT maintained that the argument has moved on and that any remedial measures taken in the future would simply harm broadband users.

A BT spokesman said: "From our point of view, it simply doesn't make sense for consumers.

We've just gone through a major restructuring and now want to concentrate on delivering [broadband]. Such measures would put delivery back years.

"It wouldn't give the network owner an incentive to keep the network upgraded, whereas we have because we carry services on it.

"I think the market has moved on. In terms of broadband, it is quite competitive, more so than in most countries in Europe. We have around 170,000 broadband customers and cable has around 240,000."